China ETFs: Plays for the World’s No. 2 Economy

August 3rd at 2:00pm by Tom Lydon

What analysts have long predicted has finally happened: China moved up another notch to become the world’s No. 2 economy, overtaking Japan. There are nearly two dozen exchange traded funds (ETFs) to play this development.

Three-plus decades of growth has moved China is the number two spot on the global economic stage, bumping Japan into third. And the country may not be done.

Aileen Wang and Alan Wheatley for Yahoo Finance report that China is on course to overtake the United States and vault into the top spot around 2025, according to projections by the World Bank, Goldman Sachs and others. [China ETFs: Opportunity and Risk.]

China’s economy expanded 11.1 % in the first half of 2010, from a year earlier, and is likely to grow more than 9% for the whole year. According to the ETF Analyzer, there are 20 direct plays on China’s economy. Sorting for three-month performance, the top ETFs happen to be those that focus on sectors:

  • Claymore/AlphaShares China Real Estate (NYSEArca: TAO): The top performer, up 10.2% in the last three months
  • Global X China Financials (NYSEArca: CHIX): up 8.6% in the last three months
  • Global X China Industrials (NYSEArca: CHII): up 5.6% in the last three months

Broader funds have also done well, including Claymore/AlphaShares China All-Cap (NYSEArca: YAO), which is up 4.8% in that time frame.

The largest China ETFs are:

  • iShares FTSE/Xinhua China 25 (NYSEArca: FXI): $8.2 billion in assets
  • SPDR S&P China (NYSEArca: GXC): $556 million in assets

According to the Analyzer, most of these ETFs are above the 200-day moving average. So you don’t miss a trading opportunity, we suggest signing up for alerts, which will send you an email when a point you specify is reached.

After wallowing in the doldrums for the better part of two decades, Japan’s stock market is finally attracting foreign money. One analyst thinks this could be what is needed for a bull run of Japanese shares. But will it be enough to nab the second position back from China? [Are Great Things Coming for Japan ETFs?]

  • iShares MSCI Japan Index (NYSEArca: EWJ)
  • WisdomTree Japan Equity Income Fund (NYSEArca: DNL)

For more stories about China or Japan, visit our global ETFs category.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.